Useful life
In one sentenceThe period over which the business expects to use an asset in its operations, or the number of units it will produce; depreciation is spread over it.
Simply put
Useful life is not the asset's actual lifespan but how long it is useful to you. A computer may work for ten years, but you replace it every three years, so its useful life for you is three.
The choice of life changes profit: a shorter life means larger annual depreciation and lower profit in the years of use.
Worked example
An accounting firm bought a computer for 6,000 SAR with no residual value and compared two useful lives.
Annual depreciation over 3 years: 6,000 ÷ 32,000 SAR
Annual depreciation over 4 years: 6,000 ÷ 41,500 SAR
Difference in annual depreciation expense between the two estimates: 2,000 − 1,500500 SAR
Don't confuse it with
Change in accounting estimatesChanging the life later is a change in an estimate that is applied to the future only.